Thirty Years' View (Vol. I of 2)

CHAPTER XCIV.

REPORT OF THE SECRETARY OF THE TREASURY TO CONGRESS ON THE REMOVAL OF THE DEPOSITS

By the clause in the charter authorizing the Secretary of the Treasury to remove the deposits, that officer was required to communicate the fact immediately to Congress, if in session, if not, at the first meeting; together with his reasons for so doing. The act which had been done was not a "removal," in the sense of that word; for not a dollar was taken from the Bank of the United States to be deposited elsewhere; and the order given was not for a "removal," but for a cessation of deposits in that institution, leaving the public moneys which were in it to be drawn out in the regular course of expenditure. An immediate and total removal might have been well justified by the misconduct of the bank; a cessation to deposit might have been equally well justified on the ground of the approaching expiration of the charter, and the propriety of providing in time for the new places of deposit which that expiration would render necessary. The two reasons put together made a clear case, both of justification and of propriety, for the order which had been given; and the secretary, Mr. Taney, well set them forth in the report which he made, and which was laid before Congress on the day after its meeting. The following are extracts from it:

"The Treasury department being intrusted with the administration of the finances of the country, it was always the duty of the Secretary, in the absence of any legislative provision on the subject, to take care that the public money was deposited in safe keeping, in the hands of faithful agents, and in convenient places, ready to be applied according to the wants of the government. The law incorporating the bank has reserved to him, in its full extent, the power he before possessed. It does not confer on him a new power, but reserves to him his former authority, without any new limitation. The obligation to assign the reasons for his direction to deposit the money of the United States elsewhere, cannot be considered as a restriction of the power, because the right of the Secretary to designate the place of deposit was always necessarily subject to the control of Congress. And as the Secretary of the Treasury presides over one of the executive departments of the government, and his power over this subject forms a part of the executive duties of his office, the manner in which it is exercised must be subject to the supervision of the officer to whom the constitution has confided the whole executive power, and has required to take care that the laws be faithfully executed.

"The faith of the United States is, however, pledged, according to the terms of the section above stated, that the public money shall be deposited in this bank, unless 'the Secretary of the Treasury shall otherwise order and direct.' And as this agreement has been entered into by Congress, in behalf of the United States, the place of deposit could not be changed by a legislative act, without disregarding a pledge, which the legislature has given; and the money of the United States must therefore continue to be deposited in the bank, until the last hour of its existence, unless it shall be otherwise ordered by the authority mentioned in the charter. The power over the place of deposit for the public money would seem properly to belong to the legislative department of the government, and it is difficult to imagine why the authority to withdraw it from this bank was confided exclusively to the Executive. But the terms of the charter appear to be too plain to admit of question; and although Congress should be satisfied that the public money was not safe in the care of the bank, or should be convinced that the interests of the people of the United States imperiously demanded the removal, yet the passage of a law directing it to be done, would be a breach of the agreement into which they have entered.

"In deciding upon the course which it was my duty to pursue in relation to the deposits, I did not feel myself justified in anticipating the renewal of the charter on either of the above-mentioned grounds. It is very evident that the bank has no claim to renewal, founded on the justice of Congress. For, independently of the many serious and insurmountable objections, which its own conduct has furnished, it cannot be supposed that the grant to this corporation of exclusive privileges, at the expense of the rest of the community, for twenty years, can give it a right to demand the still further enjoyment of its profitable monopoly. Neither could I act upon the assumption that the public interest required the recharter of the bank, because I am firmly persuaded that the law which created this corporation, in many of its provisions, is not warranted by the constitution, and that the existence of such a powerful moneyed monopoly, is dangerous to the liberties of the people, and to the purity of our political institutions.

"The manifestations of public opinion, instead of being favorable to a renewal, have been decidedly to the contrary. And I have always regarded the result of the last election of the President of the United States, as the declaration of a majority of the people that the charter ought not to be renewed. It is not necessary to state here, what is now a matter of history. The question of the renewal of the charter was introduced into the election by the corporation itself. Its voluntary application to Congress for the renewal of its charter four years before it expired, and upon the eve of the election of President, was understood on all sides as bringing forward that question for incidental decision, at the then approaching election. It was accordingly argued on both sides, before the tribunal of the people, and their verdict pronounced against the bank, by the election of the candidate who was known to have been always inflexibly opposed to it.

"The monthly statement of the bank, of the 2d September last, before referred to, shows that the notes of the bank and its branches, then in circulation, amounted to $18,413,287 07, and that its discounts amounted to the sum of $62,653,359 59. The immense circulation above stated, pervading every part of the United States, and most commonly used in the business of commerce between distant places, must all be withdrawn from circulation when the charter expires. If any of the notes then remain in the hands of individuals, remote from the branches at which they are payable, their immediate depreciation will subject the holders to certain loss. Those payable in the principal commercial cities would, perhaps, retain nearly their nominal value; but this would not be the case with the notes of the interior branches, remote from the great marts of trade. And the statements of the bank will show that a great part of its circulation is composed of notes of this description. The bank would seem to have taken pains to introduce into common use such a description of paper as it could depreciate, or raise to its par value, as best suited its own views; and it is of the first importance to the interests of the public that these notes should all be taken out of circulation, before they depreciate in the hands of the individuals who hold them; and they ought to be withdrawn gradually, and their places supplied, as they retire, by the currency which will become the substitute for them. How long will it require, for the ordinary operations of commerce, and the reduction of discounts by the bank, to withdraw the amount of circulation before mentioned, without giving a shock to the currency, or producing a distressing pressure on the community? I am convinced that the time which remained for the charter to run, after the 1st of October (the day on which the first order for removal took effect), was not more than was proper to accomplish the object with safety to the community.

"There is, however, another view of the subject, which in my opinion, made it impossible further to postpone the removal. About the 1st of December, 1832, it had been ascertained that the present Chief Magistrate was re-elected, that his decision against the bank had thus been sanctioned by the people. At that time the discounts of the bank amounted to $61,571,625 66. Although the issue which the bank took so much pains to frame had now been tried, and the decision pronounced against it, yet no steps were taken to prepare for its approaching end. On the contrary, it proceeded to enlarge its discounts, and, on the 2d of August, 1833, they amounted to $64,160,349 14, being an increase of more than two and a half millions in the eight months immediately following the decision against them. And so far from preparing to arrange its affairs with a view to wind up its business, it seemed from this course of conduct, to be the design of the bank to put itself in such an attitude, that, at the close of its charter, the country would be compelled to submit to its renewal, or to bear all the consequences of a currency suddenly deranged, and also a severe pressure for the immense outstanding claims which would then be due to the corporation. While the bank was thus proceeding to enlarge its discounts, an agent was appointed by the Secretary of the Treasury to inquire upon what terms the State banks would undertake to perform the services to the government which have heretofore been rendered by the Bank of the United States; and also to ascertain their condition in four of the principal commercial cities, for the purpose of enabling the department to judge whether they would be safe and convenient depositories for the public money. It was deemed necessary that suitable fiscal agents should be prepared in due season, and it was proper that time should be allowed them to make arrangements with one another throughout the country, in order that they might perform their duties in concert, and in a manner that would be convenient and acceptable to the public. It was essential that a change so important in its character, and so extensive in its operation upon the financial concerns of the country, should not be introduced without timely preparation.

"The United States, by the charter, reserved the right of appointing five directors of the bank. It was intended by this means not only to provide guardians for the interests of the public in the general administration of its affairs, but also to have faithful officers, whose situation would enable them to become intimately acquainted with all the transactions of the institution, and whose duty it would be to apprize the proper authorities of any misconduct on the part of the corporation likely to affect the public interest. The fourth fundamental article of the constitution of the corporation declares that not less than seven directors shall constitute a board for the transaction of business. At these meetings of the board, the directors on the part of the United States had of course a right to be present; and, consequently, if the business of the corporation had been transacted in the manner which the law requires, there was abundant security that nothing could be done, injuriously affecting the interests of the people, without being immediately communicated to the public servants, who were authorized to apply the remedy. And if the corporation has so arranged its concerns as to conceal from the public directors some of its most important operations, and has thereby destroyed the safeguards which were designed to secure the interests of the United States, it would seem to be very clear that it has forfeited its claim to confidence, and is no longer worthy of trust.

"Instead of a board constituted of at least seven directors, according to the charter, at which those appointed by the United States have a right to be present, many of the most important money transactions of the bank have been, and still are, placed under the control of a committee, denominated the exchange committee, of which no one of the public directors has been allowed to be a member since the commencement of the present year. This committee is not even elected by the board, and the public directors have no voice in their appointment. They are chosen by thy president of the bank, and the business of the institution, which ought to be decided on by the board of directors, is, in many instances, transacted by this committee; and no one had a right to be present at their proceedings but the president, and those whom he shall please to name as members of this committee. Thus, loans are made, unknown at the time to a majority of the board, and paper discounted which might probably be rejected at a regular meeting of the directors. The most important operations of the bank are sometimes resolved on and executed by this committee; and its measures are, it appears, designedly, and by regular system, so arranged, as to conceal from the officers of the government transactions in which the public interests are deeply involved. And this fact alone furnishes evidence too strong to be resisted, that the concealment of certain important operations of the corporation from the officers of the government is one of the objects which is intended to be accomplished by means of this committee. The plain words of the charter are violated, in order to deprive the people of the United States of one of the principal securities which the law had provided to guard their interests, and to render more safe the public money intrusted to the care of the bank. Would any individual of ordinary discretion continue his money in the hands of an agent who violated his instructions for the purpose of hiding from him the manner in which he was conducting the business confided to his charge? Would he continue his property in his hands, when he had not only ascertained that concealment had been practised towards him, but when the agent avowed his determination to continue in the same course, and to withhold from him, as far as he could, all knowledge of the manner in which he was employing his funds? If an individual would not be expected to continue his confidence under such circumstances, upon what principle could a different line of conduct be required from the officers of the United States, charged with the care of the public interests? The public money is surely entitled to the same care and protection as that of an individual; and if the latter would be bound, in justice to himself, to withdraw his money from the hands of an agent thus regardless of his duty, the same principle requires that the money of the United States should, under the like circumstances, be withdrawn from the hands of their fiscal agent."

Having shown ample reasons for ceasing to make the public deposits in the Bank of the United States, and that it was done, the Secretary proceeds to the next division of his subject, naturally resulting from his authority to remove, though not expressed in the charter; and that was, to show where he had ordered them to be placed.

"The propriety of removing the deposits being thus evident, and it being consequently my duty to select the places to which they were to be removed, it became necessary that arrangements should be immediately made with the new depositories of the public money, which would not only render it safe, but would at the same time secure to the government, and to the community at large, the conveniencies and facilities that were intended to be obtained by incorporating the Bank of the United States. Measures were accordingly taken for that purpose, and copies of the contracts which have been made with the selected banks, and of the letters of instructions to them from this department, are herewith submitted. The contracts with the banks in the interior are not precisely the same with those in the Atlantic cities. The difference between them arises from the nature of the business transacted by the banks in these different places. The State banks selected are all institutions of high character and undoubted strength, and are under the management and control of persons of unquestioned probity and intelligence. And, in order to insure the safety of the public money, each of them is required, and has agreed, to give security whenever the amount of the deposit shall exceed the half of the amount of the capital actually paid in; and this department has reserved to itself the right to demand security whenever it may think it advisable, although this amount on deposit may not be equal to the sum above stated. The banks selected have also severally engaged to transmit money to any point at which it may be required by the direction of this department for the public service, and to perform all the services to the government which were heretofore rendered by the Bank of the United States. And, by agreements among themselves to honor each other's notes and drafts, they are providing a general currency at least as sound as that of the Bank of the United States, and will afford facilities to commerce and in the business of domestic exchange, quite equal to any which the community heretofore enjoyed. There has not been yet sufficient time to perfect these arrangements, but enough has already been done to show that, even on the score of expediency, a Bank of the United States is not necessary, either for the fiscal operations of the government, or the public convenience; and that every object which the charter to the present bank was designed to attain, may be as effectually accomplished by the State banks. And, if this can be done, nothing that is useful will be lost or endangered by the change, while much that is desirable will be gained by it. For no one of these corporations will possess that absolute and almost unlimited dominion over the property of the citizens of the United States which the present bank holds, and which enables it at any moment, at its own pleasure, to bring distress upon any portion of the community whenever it may deem it useful to its interest to make its power felt. The influence of each of the State banks is necessarily limited to its own immediate neighborhood, and they will be kept in check by the other local banks. They will not, therefore, be tempted by the consciousness of power to aspire to political influence, nor likely to interfere in the elections of the public servants. They will, moreover, be managed by persons who reside in the midst of the people who are to be immediately affected by their measures; and they cannot be insensible or indifferent to the opinions and peculiar interests of those by whom they are daily surrounded, and with whom they are constantly associated. These circumstances always furnish strong safeguards against an oppressive exercise of power, and forcibly recommend the employment of State banks in preference to a Bank of the United States, with its numerous and distant branches.

"In the selection, therefore, of the State banks as the fiscal agents of the government, no disadvantages appear to have been incurred on the score of safety or convenience, or the general interests of the country, while much that is valuable will be gained by the change. I am, however, well aware of the vast power of the Bank of the United States, and of its ability to bring distress and suffering on the country. This is one of the evils of chartering a bank with such an amount of capital, with the right of shooting its branches into every part of the Union, so as to extend its influence to every neighborhood. The immense loan of more than twenty-eight millions of dollars suddenly poured out, chiefly in the Western States, in 1831, and the first four months in 1832, sufficiently attests that the bank is sensible of the power which its money gives it, and has placed itself in an attitude to make the people of the United States feel the weight of its resentment, if they presume to disappoint the wishes of the corporation. By a severe curtailment it has already made it proper to withdraw a portion of the money it held on deposit, and transfer it to the custody of the new fiscal agents, in order to shield the community from the injustice of the Bank of the United States. But I have not supposed that the course of the government ought to be regulated by the fear of the power of the bank. If such a motive could be allowed to influence the legislation of Congress, or the action of the executive departments of the government, there is an end to the sovereignty of the people; and the liberties of the country are at once surrendered at the feet of a moneyed corporation. They may now demand the possession of the public money, or the renewal of the charter; and if these objects are yielded to them from apprehensions of their power, or from the suffering which rapid curtailments on their part are inflicting on the community, what may they not next require? Will submission render such a corporation more forbearing in its course? What law may it not hereafter demand, that it will not, if it pleases, be able to enforce by the same means?"

Thus the keeping of the public moneys went to the local banks, the system of an independent treasury being not then established; and the notes of these banks necessarily required their notes to be temporarily used in the federal payments, the gold currency not being at that time revived. Upon these local banks the federal government was thrown —first, for the safe keeping of its public moneys; secondly, to supply the place of the nineteen millions of bank notes which the national had in circulation; thirdly, to relieve the community from the pressure which the Bank of the United States had already commenced upon it, and which, it was known, was to be pushed to the ultimate point of oppression. But a difficulty was experienced in obtaining these local banks, which would be incredible without understanding the cause. Instead of a competition among them to obtain the deposits, there was holding off, and an absolute refusal on the part of many. Local banks were shy of receiving them – shy of receiving the greatest possible apparent benefit to themselves – shy of receiving the aliment upon which they lived and grew! and why this so great apparent contradiction? It was the fear of the Bank of the United States! and of that capacity to destroy them to which Mr. Biddle had testified in his answers to the Senate's Finance Committee; and which capacity was now known to be joined to the will; for the bank placed in the same category all who should be concerned in the removal – both the government that ordered it, and the local banks which received what it lost. But a competent number were found; and this first attempt to prevent a removal, by preventing a reception of the deposits elsewhere, entirely failed.

CHAPTER XCV.

NOMINATION OF GOVERNMENT DIRECTORS, AND THEIR REJECTION

By the charter of the bank, the government was entitled to five directors, to be nominated annually by the President, and confirmed by the Senate. At the commencement of the session of 1833-'34, the President nominated the five, four of them being the same who had served during the current year, and who had made the report on which the order for the removal of the deposits was chiefly founded. This drew upon them the resentment of the bank, and caused them to receive a large share of reproach and condemnation in the report which the committee of the bank drew up, and which the board of directors adopted and published. When these nominations came into the Senate it was soon perceived that there was to be opposition to these four; and for the purpose of testing the truth of the objections, Mr. Kane, of Illinois, submitted the following resolution:

"Resolved, That the nominations of H. D. Gilpin, John T. Sullivan, Peter Wager, and Hugh McEldery, be recommitted to the Committee on Finance, with instructions to inquire into their several qualifications and fitness for the stations to which they have been nominated; also into the truth of all charges preferred by them against the board of directors of the Bank of the United States, and into the conduct of each of the said nominees during the time he may have acted as director of the said bank; and that the said nominees have notice of the times and places of meetings of said committee, and have leave to attend the same."

Which was immediately rejected by the following vote:

"Yeas. – Messrs. Benton, Brown, Forsyth, Grundy, Hendricks, Hill, Kane, King of Alabama, Linn, McKean, Moor, Morris, Rives, Robinson, Shepley, Tallmadge, Tipton, White, Wilkins, Wright. – 20.

"Nays. – Messrs. Bell, Bibb, Black, Calhoun, Chambers, Clay, Clayton, Ewing, Frelinghuysen, Kent, King of Georgia, Knight, Mangum, Naudain, Poindexter, Porter, Prentiss, Robbins, Silsbee, Smith, Southard, Sprague, Swift, Tomlinson, Tyler, Waggaman, Webster. – 27."